South Korea Cracks Down on ‘Made in Korea’ Labeling Schemes Aimed at Dodging U.S. Tariffs
Introduction
On April 21, 2025, South Korea’s Korea Customs Service (KCS) announced it had uncovered a notable rise in attempts to disguise foreign goods—primarily from China—as South Korean exports. The suspected motivation is straightforward: leverage South Korea’s trade status and free-trade arrangements to reduce exposure to U.S. tariffs and certain U.S. restrictions.
This is not just a customs story. It is a supply-chain governance story: when tariffs rise, so does the incentive to re-route, relabel, minimally transform, or “paper” goods through third countries. That creates new compliance, reputational, and operational risk for manufacturers, traders, logistics firms, and importers.
Key Points
- Scale of the findings: KCS reported 29.5 billion won worth of country-of-origin violations in the first quarter of 2025, with U.S.-bound shipments comprising 97% of that total.
- Comparison to prior year: KCS contrasted that with 34.8 billion won in violations for all of 2024, where U.S.-bound shipments were 62%.
- How schemes worked (examples reported):
- Battery cathode materials imported from China allegedly shipped to the U.S. with South Korea marked as the origin.
- Surveillance cameras imported in parts from China allegedly reassembled in South Korea to bypass U.S. restrictions on certain Chinese communication devices.
- Enforcement posture: KCS said it launched a dedicated task force and planned additional measures, with violations referred to prosecutors.
- Bilateral coordination: South Korean customs officials met with U.S. officials to discuss joint investigation efforts.
- Why it matters: Origin fraud can trigger penalties, seizures, retroactive duty assessments, loss of trade privileges, supplier termination, and downstream disruption if shipments are held or reclassified.
How To
1) Identify whether you are exposed (fast)
- Pull 6–12 months of import records (commercial invoices, packing lists, certificates of origin, and entry summaries).
- Flag product families with high tariff differentials (or those subject to special restrictions).
- Ask your forwarder for vessel/flight routes and any mid-route consolidation points that could imply transshipment risk.
2) Tighten your “country of origin” controls
- Require suppliers to provide:
- Manufacturing process descriptions (what happens where),
- Bills of materials and key inputs origin,
- HS classification rationale (and binding rulings where applicable).
- Verify whether “substantial transformation” actually occurs where claimed; simple repacking, labeling, or assembly may not qualify.
3) Audit your certificates of origin (COOs)
- Implement random sampling:
- Compare COO claims against production records, purchase orders, and factory locations.
- Check whether the issuer is legitimate and authorized.
- Put “no COO, no ship” rules in place for high-risk SKUs.
4) Contract for compliance, not just price
- Add clauses for:
- Warranty of origin accuracy and supporting documentation,
- Indemnities for duties, penalties, and delays caused by misdeclaration,
- Audit rights (including third-party audits) and termination for non-compliance.
5) Prepare for holds and reclassification
- Build an escalation playbook:
- Who handles customs queries,
- What documents can be produced within 24 hours,
- Pre-approved alternate suppliers and routing options.
- Consider pre-clearance strategies and consistent classification/origin positions across ports.
Conclusion
South Korea’s April 21, 2025 disclosure is a clear signal of where trade enforcement is headed in a tariff-heavy environment: closer scrutiny of origin claims, more cross-border coordination between customs agencies, and higher pressure on importers to prove—not just assert—where goods truly come from.
For businesses, the practical response is immediate and operational: map high-risk SKUs, harden origin documentation, audit supplier claims, and embed enforceable compliance terms into contracts before disruption arrives at the port.